The Greek Plan

Greek 2013 budget sees sixth year of recession: source | Reuters.

I think it is becoming clear that Greece is merely a pawn in the Eurocrisis. There is a ongoing depression in Greece with no end in sight. While great care has been given to make sure bondholders got some money and the banks are kept afloat, no one cares about what is happening to the Greek people because of this crisis.

The troika knows that a Greek default or a Greek eurozone exit will be prohibitively expensive and probably lead to a financial panic. Greece cannot be allowed to exit the straitjackets of its high debt burden through a Grexit-induced de facto default. However, the northern-tier electorate resents continuous Greek bailouts while these countries have endured their own cutbacks and raised retirement ages in recent years.

We have two opposing forces at work, and the solution is a middle path. Greece is given just enough money to scrape by. While this action keeps political resentment low, it does not help the Greeks. There is no way out for them.

The country’s own politicians have sold the country out. In exchange for bailout money, which primarily goes to transfer payments for political allies and politically connected banks, they keep the foot of austerity on the neck of the people

It’s only a matter of time before social unrest leads to a change in government, and the new government will promptly default on all of this debt.   People are barely getting by now, and the winter is coming. If the Greeks can’t afford to heat their homes during these months, the situation will come to a head.

 

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